Solvency of Canadian Defined Benefit Pension Plans Improve Slightly in Q1: Solvency of Canadian Pension Plans Improves

Article excerpt

TORONTO - The average defined benefit pension plan in Canada likely got just a little bit healthier in the first quarter, according a model plan created by human resources consultant Mercer.

Mercer said Monday that its Pension Health Index showed the solvency ratio of its model plan up three percentage points to 63 per cent at the end of March.

The solvency ratio is the amount of money available to pay for earned benefits -- known as liabilities under a plan -- compared with the cost of buying annuities to cover those benefits in the event of an immediate plan windup.

Mercer credited good returns in equity markets along with an increase in long-term federal bond yields for the improvement.

"Long-term federal bond yields increased by 15 basis points in the quarter," Scott Clausen, partner, retirement, risk and finance, said in a statement accompanying the results.

He said that raised the index by about one percentage point, while positive investment returns bumped the index up by roughly two percentage points.

"Many plan sponsors are looking for an improvement in the health of their plans in 2012 after lacklustre investment returns and plummeting interest rates in 2011 brought funded ratios back down to 2008 levels," Clausen added. …